Management's Knowing Process and the Theory of Constraints

Abstract

Advances in brain science indicate that among human genetic inheritances is the brain's capability for forming and re-forming neural circuits that constitute our perceptions of the "world out there." For the most part, each of us goes about daily life taking such perceptions as true renditions of reality, even though our "realities" are built up from specific and limited past experiences.

The role perception plays in business has been underappreciated, but is critical to management's knowing process, which needs to be attuned to uncovering erroneous assumptions in order to more successfully dissolve internal conflicts, adapt early to changes in the external environment, and secure competitive advantage. The Theory of Constraints (TOC) is a proven methodology for innovative cause and effect analyses for uncovering erroneous assumptions that produce highly undesirable effects in the overall system. TOC applies systems thinking to management's tasks with the overarching goal of large-scale performance improvement through identifying and fixing a system's key constraints. Both effective TOC implementation and the nurturing of a win-win partnership with employees are greatly advanced if management and the board of directors will bring themselves to perceive accounting earnings as a result of operations, instead of the means to control their firm's operations.

Keywords: Management's knowing process, theory of constraints, shareholder value review

JEL Classification: D21, D83, G30, L21, M41